Altius Minerals Corporation · TSX:ALS
Altius Minerals — Merger or Acquisition (January 2014)
41 slides from Altius Minerals's merger presentation, Jan 7, 2014
Slide 1: Emerging as Canada's Leading Diversified Minerals Royalty Company
EMERGING AS CANADA'S LEADING DIVERSIFIED MINERALS ROYALTY COMPANY
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This document includes certain statements that constitute “forward‐looking statements” and “forward- looking information” within the meaning of applicable securities laws (collectively, “forward‐looking statements”). Forward-looking statements include statements regarding
Slide 3: Transaction Highlights
TRANSACTION HIGHLIGHTS This transaction transforms Altius into Canada's Leading Diversified Minerals Royalty Company Transaction • Altius is acquiring 11 production stage royalties and an extensive undeveloped mineral lands position • Long to very long life royalties and excellent royalty growth pot
Slide 4: Transaction Summary
TRANSACTION SUMMARY Altius is acquiring on a 51% basis: • The 11 production stage royalty interests of Prairie Mines & Royalty Limited (“PMRL”), a wholly owned subsidiary of Sherritt International Corporation, through the newly formed Altius Prairie Royalties Corp. (“Altius Acquireco”) • Total purch
Slide 5: Transaction Valuation
TRANSACTION VALUATION • Attractive purchase price multiple • Assets rank among the highest quality within the royalty sector • Strong upside potential Acquisition Price Comparison – EV / EBITDA 12 month Trailing Selected Royalty Peer Trading Comparables Selected Royalty Precedent Transactions 40x 37
Slide 6: Fully Funded Transaction
FULLY FUNDED TRANSACTION • Altius is funding $254 million comprised of $233 million for 51% of PMRL and $21 million for 50% of CDP • Funding consists of: • $124 million of cash and investments • $80 million non-revolving senior debt • $50 million subordinate debt Closing Conditions • Acquisition of
Slide 7: Acquisition Assets Overview – PMRL (51% Altius)
ACQUISITION ASSETS OVERVIEW – PMRL (51% Altius) The PMRL royalty portfolio acquisition brings 11 paying potash, electrical coal and metallurgical coal royalties into Altius Potas h • Potash royalties relate to more than 60% of Canada’s potash production(1) • Average life of the potash assets on whic
Slide 8: Acquired PMRL Royalties
ACQUIRED PMRL ROYALTIES • 11 Canadian mine royalties producing coal and potash located in Alberta and Saskatchewan, Canada LTM Royalty Revenue (1) Mine Lessee / Operator ($million) Genesee (electrical coal) Capital Power / Westmoreland $6.5 Genesee Alberta Paintearth (electrical coal) ATCO Power / W
Slide 9: Acquisition Assets Overview – CDP (50% Altius)
ACQUISTION ASSETS OVERVIEW – CDP (50% Altius) CDP brings production stage royalties and extensive coal and potash mineral resources, some of which represents deposit extensions to currently producing mines • A portfolio of small production stage royalties on potash and electrical coal operations (mo
Slide 10: Combines Nicely with Altius' Existing Royalty Portfolio
COMBINES NICELY WITH ALTIUS’ EXISTING ROYALTY PORTFOLIO Altius has a NSR royalty on the Voisey’s Bay nickel-copper-cobalt mine operated by Vale • Last Twelve Month Royalty Revenue: $3 million(1) • Location: Labrador, Canada Newfoundland and Labrador • Estimated Remaining Mine Life: >20 years Voisey’
Slide 11: Altius Background
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Slide 12: Pro Forma Capital Structure
PRO FORMA CAPITAL STRUCTURE • Altius trades on the TSX under the symbol ALS and is a constituent of both the S&P/TSX Mining and S&P/TSX Small Cap indices Shares Outstanding(1): 27,619,820 Cash & Investments(3): $94 Million Fully Diluted Shares Outstanding: 27,911,320 Debt: $80 Million Basic Market C
Slide 13: Altius' Royalty History
ALTIUS’ ROYALTY HISTORY Altius founded in 1997 Altius spins out 2 with a Project Acquires 9% of Spins out 3rd Acquires Sherritt’s companies, Generation (“PG”) / International Royalty company; PMRL & CDP royalties Aurora (uranium) Royalty Creation Corporation and Alderon Iron Ore for $481M in & Rambl
Slide 14: Disciplined Strategy Focused on Returning Capital to Shareholders
DISCIPLINED STRATEGY FOCUSED ON RETURNING CAPITAL TO SHAREHOLDERS • Altius has maintained an excellent capital Share Price Performance structure throughout its 17 year history 2013 YTD • It built up significant cash profit through its mineral exploration project generation business Altius 10% while
Slide 15: Management and Board of Directors
MANAGEMENT AND BOARD OF DIRECTORS Executive Management Board of Directors Brian F. Dalton – President, CEO & Director John A. Baker, QC – Chairman of Board, Partner • Built a successful group of private mineral • Sr. Partner at Ottenheimer Baker with strong board exploration and exploration service
Slide 16: Royalty Portfolio Details: Production Stage Royalties
ROYALTY PORTFOLIO DETAILS Production Stage Royalties
Slide 17: Production-Stage Royalties
PRODUCTION-STAGE ROYALTIES 12 Canadian mine royalties producing electrical coal, potash, nickel, copper, cobalt and metallurgical coal Newfoundland Genesee and Labrador Alberta Voisey’s Bay Highvale Saskatchewan Cory Edmonton Cheviot Saskatoon Paintearth Patience Lake Labrador City Vanscoy Allan Cal
Slide 18: Revenue Diversification
REVENUE DIVERSIFICATION • Substantially diversifies Altius’ asset base by commodity, geography and asset • Revenue from 6 commodities with more than 50% from low risk, inflation adjusted electrical coal royalties • No single asset contributes more than 22% of revenue • Development pipeline comprised
Slide 19: Strong Operating History – Production Royalties
STRONG OPERATING HISTORY – PRODUCTION ROYALTIES • The royalty acquisitions enhance Altius’ cash flow profile and provides long-term stability • Electrical coal royalties are paid by the power utilities and the royalty rates are escalated in accordance with Canadian GDP inflation in most cases • Lead
Slide 20: High-Quality Electrical Coal Royalties
HIGH-QUALITY ELECTRICAL COAL ROYALTIES • Electrical coal royalties among the highest-quality and lowest-risk royalties in Genesee Power the industry Mine Plant Insulated from commodity price and inflation risks – tonnage based royalties Simple open-pit bulk tonnage mining methods Mine-mouth co
Slide 21: Coal Royalty Details
COAL ROYALTY DETAILS Genesee Paintearth Sheerness Highvale Cardinal River Electrical Electrical Electrical Electrical Coal Type Metallurgical (mine-mouth) (mine-mouth) (mine-mouth) (mine-mouth) Operator Power Plant Operator n/a Estimated Closure Dates 2039-2055 2019-2031 2036-2040 2026-2061 n/a Sund
Slide 22: Alberta Electrical Coal Royalty Upside
ALBERTA ELECTRICAL COAL ROYALTY UPSIDE • Coal represents the base-load of electricity generation • Power plants have regulatory defined operational lives based upon Canadian long-term carbon emission targets • Valuation model based on regulated plant lives • Upside opportunity in form of potential e
Slide 23: Long-Life and World Class Potash Royalties
LONG-LIFE AND WORLD CLASS POTASH ROYALTIES • Altius is acquiring royalties on 6 potash mines representing over 60%(1) of potash production in Canada • Assets have extremely long remaining mine lives with a mean mine life of over 70 years • All operations have existed for at least 40 years with sever
Slide 24: Potash Mines Have Strong Performance Records
POTASH MINES HAVE STRONG PERFORMANCE RECORDS Rocanville(1) Allan(1) 3,000 800 2,000 800 2,573 2,647 2,834 1,744 2,430 Vancouver FOB Potash Prices Vancouver FOB Potash Prices 2,183 1,431 Annual Production (Kt) Annual Production (Kt) 2,250 1,990 600 1,500 1,344 600 1,880 1,850 1,833 1,897 1,169 1,710
Slide 25: Expandable Operations - Excellent Long-Term Growth Upside
EXPANDABLE OPERATIONS - EXCELLENT LONG-TERM GROWTH UPSIDE • Fundamentals in Potash industry viewed as favorable long-term • Strong demand growth due to population growth, changing diets and a requirement for higher unit area agricultural yields • Saskatchewan producers are in the process of expandin
Slide 26: Voisey's Bay Royalty
VOISEY’S BAY ROYALTY • Voisey’s Bay royalty was acquired in 2003 and achieved payback from its investment in 2008 • Altius holds a 10% partnership interest in a 3% NSR • Low cost production of nickel-copper- cobalt from conventional sulphide ores with over 20 years of remaining mine life • Operated
Slide 27: Royalty Portfolio Details: Exploration and Development Stage Royalties
ROYALTY PORTFOLIO DETAILS Exploration and Development Stage Royalties
Slide 28: Development and Advanced Exploration Royalties
DEVELOPMENT AND ADVANCED EXPLORATION ROYALTIES • Embedded growth in royalty revenue through new project developments and expansions comes with no future funding requirements Newfoundland and Labrador Alberta Saskatchewan Central Mineral Belt Edmonton Geothite Bay Julienne Lake Saskatoon Kami CDP Lab
Slide 29: Carbon Development Partnership – Long-Term Growth
CARBON DEVELOPMENT PARTNERSHIP – LONG-TERM GROWTH • CDP properties cover ~12 billion tonnes of Resources and Reserves (1) undeveloped coal reserves and resources in Proven and Measured and Inferred western Canada and ~2 billion tonnes of Probable Indicated Resources (millions of tonnes) Reserves Res
Slide 30: Deep Iron Ore Royalty Development Pipeline
DEEP IRON ORE ROYALTY DEVELOPMENT PIPELINE 29
Slide 31: Kami Development Stage Royalty
KAMI DEVELOPMENT STAGE ROYALTY • Altius’ current portfolio of Canadian 3% GSR (Alderon Feasibility Study) development assets includes a 3% gross sales (BBA – Dec. 2012) royalty underlying the Alderon/Hebei Steel Gross Year Production Selling Price Royalty(1) Kami iron ore project (Mt) (Mt) Revenue (
Slide 32: Kami 2013 Project Milestones
KAMI 2013 PROJECT MILESTONES Hebei Iron and Steel completed major strategic investment and off-take Environmental Assessment clearance expected imminently Debt financing lead underwriter engaged ”Long-lead” equipment ordered Port development on time and budget 31
Slide 33: Royalty Pipeline – Julienne Lake Iron Ore Project
ROYALTY PIPELINE – JULIENNE LAKE IRON ORE PROJECT • Newfoundland and Labrador offering its part of the Julienne Lake Deposit in a competitive EOI process (~580M mineable tonnes at 33.2%) • Altius’ claims cover the remainder of the deposit • 2013 Concept Study indicates potential for low operating an
Slide 34: Indirect Royalty Investments
INDIRECT ROYALTY INVESTMENTS • Over the past two years significant market Éléonore Mine Location based valuation discounts have periodically emerged for some royalty companies compared to the value of their royalty assets • Altius has acquired ~ 8% of Virginia (Éléonore royalty) and ~6% of Callinan
Slide 35: Royalty Portfolio: Project Generation Royalty Pipeline
ROYALTY PORTFOLIO Project Generation Royalty Pipeline
Slide 36: Project Generation Is Royalty Creation at Altius
PROJECT GENERATION IS ROYALTY CREATION AT ALTIUS • Mineral exploration project generator • Generate and define a mineral project opportunity • Form a partner funded joint venture to retain a minority direct project interest, or • Convert the project interest into a shareholding in a public vehicle •
Slide 37: Our Project Generation Business Partners (Since 1998)
OUR PROJECT GENERATION BUSINESS PARTNERS (SINCE 1998) 36
Slide 38: Project Generation Business – Partner Funded Exploration
PROJECT GENERATION BUSINESS – PARTNER FUNDED EXPLORATION • Nine current JV’s/Alliance agreements in Newfoundland & Labrador and Quebec Partner Spending (Exploration Only) $12,000,000 $10,000,000 $8,000,000 $6,000,000 $4,000,000 $2,000,000 $- 2009 2010 2011 2012 2013 (Est.) 37
Slide 39: Project Generation Pipeline - Chile
PROJECT GENERATION PIPELINE - CHILE • Recently entered a 10 year project generation initiative in partnership with Santiago’s Zeus Capital • Altius retained royalties on generated projects • Altius contributing capital and project generation and deal making expertise 38
Slide 40: Other 2013 Project Generation Business Highlights
OTHER 2013 PROJECT GENERATION BUSINESS HIGHLIGHTS • Completed a $20 million earn in JV with Anglo American on Natashquan nickel-PGM discovery • A 2nd multi-year exploration Alliance with Virginia Mines in Quebec • Partners Mamba and Century announced iron ore discoveries at Snelgrove and Red Dragon
Slide 41: Thank You
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